BY: Clay Perry, Security/Fraud Manager – Texas First Bank
The term “Security Fraud” covers a wide range of illegal activities, all of which involve the deception of investors or the manipulation of financial markets. There are many types of securities fraud, including but not limited to the following: * High Yield Investment Fraud * Ponzi Schemes * Pyramid Schemes * Advanced Fee Schemes * Foreign Currency Fraud * Broker Embezzlement *
Hedge Fund Related Fraud * Late Day Trading The most common are High Yield Investment Frauds, Ponzi & Pyramid Schemes and Advance Fee Schemes. High Yield Investment Frauds
* Are characterized by promises of high rates of return with little to no risk. * May involve various forms of investments (e.g. securities, commodities, real estate, etc.) * “Too good to be
true” investment opportunities. * Offers are generally unsolicited Ponzi & Pyramid Schemes * Use money collected from new victims to pay the high rates of return promised to earlier
investors. * Payouts give the impression of a legitimate, money making enterprise behind the fraudster’s story. In reality, investors are the only source of the funding. Advance Fee Schemes
* Victims advance relatively small sums of money in the hope of realizing much larger gains. * Gains never materialize because there is no legitimate underlying investment. * To participate a particular investment opportunity, victims must first send funds to cover “taxes” or “processing fees”. * After the victim sends the “fees”, the fraudsters appropriate the funds and never deliver
on the investment. There are many ways to protect yourself and avoid becoming a victim. Here are several to assist you with this. Identify the Warning Signs * Does the offer sound too good to be true? * Is the seller using high pressure tactics? * Was the investment offer unsolicited? * Did the seller ask for information that is usually considered personal (e.g. social security number, credit card information, etc.) over the phone or internet? If you answer “yes” to any of the above questions when considering an investment opportunity, you may be the target of a scam artist. Take Action to Avoid Fraud * Don’t believe everything you are told by the seller. Take the time to do your own research on the investments potential. * Don’t assume the solicitor is who he or she claims to be.
* Check with federal and state securities regulators to find out if there have been any complaints against the company. * Ask the promoter whether, and how much, he or she is being paid to tout the opportunity. * Ask where the company is incorporated and then call that state to ensure that the company has a current annual report on file. * Request written financial information, such as
prospectus, annual report, offering circular, or financial statements, then compare the written information to what you were told. * Get offers in writing and save a copy for your records. * Check with a trusted financial advisor, your broker, or an attorney about any investments you are considering. Report scams when they occur * Don’t be embarrassed. * File a complaint with the Securities and Exchange Commission, state securities regulator, or a law enforcement agency. * Report the crime promptly, you will have a better chance of getting your money back if you do.
